Wipro’s $3.5 Billion Deal Wins and $961M Large Deals Boost Q3 Margins, Spark FY25-27 Optimism and Strong Q4 Outlook
Wipro shares surged nearly 8% on January 20 after the IT services major posted a better-than-expected Q3 performance for the quarter ending December 31, 2024.
The IT major reported a robust 24% year-on-year growth in its net profit, which reached Rs 3,354 crore. The Q3 earnings growth was significantly better than analysts' expectations of a decline in profits.
Wipro's Modest Revenue Growth
The company's revenue showed a modest 0.5% rise to Rs 22,319 crore. Although the increase in revenue was modest, the real showstopper was in the operating margins. These had reached their highest levels in three years, thanks to better cost controls and operational efficiencies.
This margin expansion has attracted analysts' attention as they have increased their future earnings estimates for Wipro. Some of the major brokerages such as Nomura and Macquarie have positive views on the company's performance and growth prospects.
Strong Deal Bookings Boost Confidence
Analysts were impressed by Wipro's strong deal bookings, which stood at $3.5 billion in Q3, with large deals accounting for $961 million of that amount.
The IT giant also said it expects Q4 IT services revenue to grow by up to 1% in constant currency terms. Wipro delivered strong results despite a seasonally slow quarter, helped by its robust execution and focus on cost optimization.
Positive Response by Brokerages
Brokerage firms have responded quite positively to the numbers. Nomura has upgraded FY25-27 EPS estimates in the range of 2-5% while setting a target price of Rs 340. The brokerage firm maintained an 'Outperform' call with a target price of Rs 330. According to it, Wipro did well on margin.
Nuvama Institutional Equities has upgraded Wipro's stock to a 'buy' rating, citing strong margin performance and a favorable portfolio mix. It also said the company's momentum is positive. Citi, however, remains cautious on Wipro, citing near-term challenges and competition in the Indian market.
However, Citi remains conservative, with a 'sell' rating, but admits the company has a pick-up in momentum. Citi points out that, while the IT sector itself has faced difficult times, Wipro has performed remarkably on its operating margins to maintain investors' confidence.
Going forward, Wipro remains hopeful. Its operating margins are expected to continue on the growth trajectory. Investor confidence has been further boosted by its Q3 performance and the promising Q4 outlook, leaving Wipro as the star performer in the Indian IT sector.